Rules Eased, a Plan Grows

The New York Times. (June 24, 2012) By Vickie Elmer

MORE homeowners who are ''underwater,'' or owe more on their homes than they are worth, have been taking advantage of an expanded Home Affordable Refinance Program ® to refinance their loans and obtain lower interest rates, according to a recent government report. Industry experts expect that the numbers will continue to grow now that qualifications have been loosened.

According to the June report, by the Federal Housing Finance Agency, which oversees Fannie Mae and Freddie Mac, in the first quarter 180,000 mortgages were refinanced through what is known as HARP ® 2.0, almost double the 93,000 in the fourth quarter of 2011 and the highest quarterly number since the HARP ® program started in 2009.

HARP ® was created by the federal government to help homeowners, whose mortgages are owned or guaranteed by Fannie and Freddie and made before May 31, 2009, refinance into loans with less onerous terms. The program was expanded last fall with several modifications, including the removal of certain fees and a second appraisal, and an extension of the deadline to Dec. 31, 2013. In addition, the cap was removed on the loan-to-value ratio. When the program began, there had been a ceiling of 125 percent, meaning loans could not be underwater by more than 25 percent. (Underwater loans are more than 100 percent loan to value.)

You'll see an explosion in that above-125-L.T.V. category,'' said Andrew BonSalle, a senior vice president of Fannie Mae and the head of its underwriting and pricing. Since the beginning of the year, 4,400 loans with L.T.V.'s greater than 125 percent were refinanced, according to the Federal Housing Finance Agency report. And of the 180,000 total HARP ® refinancings in the first quarter, 41,000 were to New Jersey homeowners and 32,000 to New York.

There's a lot of borrowers who don't believe they're eligible,'' Mr. BonSalle said, adding that lenders need to keep reaching out to underwater homeowners so they know they can participate. He noted, however, that because of the boom in HARP ® 2.0 refinancing combined with other refinancing, thanks to historically low interest rates, some lenders have been facing large application backlogs. Underwater homeowners will, therefore, need to be patient with their lenders.

HARP ® business is very strong,'' said Kevin Watters, a senior vice president and the head of mortgage originations at JPMorgan Chase. Homeowners should refinance while interest rates are still low,'' Mr. Watters added, explaining that customers can supply much of the necessary information through a secure Web site in addition to personal interviews. Like many other lenders, JPMorgan Chase has been focused on offering HARP ® refinancing to current customers whose mortgages are serviced by the bank. Borrowers can also contact any participating lender, though finding one that accepts HARP ® applications from new customers may be challenging.

Mr. Watters said that Chase was mailing letters to customers who prequalified for a HARP ® 2.0 refinancing. The letters offer borrowers reduced rates with no closing costs and closing in 30 days, assuming homeowners can show verification of employment. Under the federal guidelines, HARP ® borrowers must also be current on their monthly mortgage payments, though they may have had one late payment, provided it occurred at least six months before they applied to the HARP ® program. Homeowners with private mortgage insurance will generally be allowed to carry that over to the new refinanced HARP ® loan, Mr. BonSalle said. But borrowers with a second mortgage must get the lender of that loan to agree to the HARP ® refinancing.

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